What are Assets Under Management in Crypto?

So, you have heard of Assets Under Management (AUM) and now you want to know what it has to offer. AUM is one of the most important metrics when it comes to seeing how well your portfolio is performing. It reflects that your online investments have been diversified enough across different assets and you shouldn't feel bad if some of them turn out not to be profitable over the long run.

Assets Under Management In Crypto (AUM) is a term used in the financial industry that refers to the total value of all securities, funds and other investments owned or controlled by a single entity. It's also one of the key metrics used by most organisations when measuring their performance.

Buying and selling virtual assets like crypto coins and NFTs to use as investments while monitoring a portfolio's overall value growth is known as crypto asset management. The idea of maintaining an asset portfolio—or a part of one—is not new, as was previously indicated, but it has only lately become required as a result of investors' interest in cryptocurrencies and other digital assets.

Investors take AUM into account when choosing a financial advisor or mutual fund since it shows the size of a financial institution and acts as a success indicator for the business.

The AUM calculation method

The total value of Assets Under Management In Crypto by an asset management firm never remains constant. It changes depending on how much money has already been invested by existing investors and how many new investors there are. Another element is the returns a mutual fund produces. Companies use a variety of methods to determine the assets they are managing.

Positive returns boost the fund's overall investments, which attracts more investors and ultimately grows the amount of assets managed. When a fund produces poor returns, the company's asset volume declines. If shareholders sell their shares, the fund's value will decrease, resulting in a smaller AUM.

In order to support both short-term and long-term individual and communal portfolio growth, alternative asset managers must develop a deeper grasp of the effects of the crypto-sector AUM as blockchain technology spreads over the globe.

There are other methods that go beyond the fundamentals. Turning our focus here is especially important because AUM is frequently an important factor in determining company fees, with some utilising a fixed percentage factor related directly to it.

Impact of AUM on different sectors

The following four areas can have a significant impact.

Macro Sentiment

Possibly since 2018, the macro sentiment for cryptocurrencies has been at its lowest ebb. Too many cryptocurrency-based ventures and smaller blockchain-focused asset managers have run out of money, and as a result, many of them have had to close their doors. However, as Warren Buffett famously advised, "Be greedy when others are afraid." For individuals who can handle the short-term storms on their finances and emotions and have a mid- to long-term perspective, such a concept might be wise.

Now can be a highly appealing time to start investing in cryptocurrency funds given the industry conflict. The agreement between BlackRock and Coinbase shows that institutions have already begun to offer access to cryptocurrency investing possibilities. To allow for a corresponding throttling of portfolio allocations, asset managers should continue to be alert to signs of crypto sentiment and maintain careful eyes on them.

Emerging Tech

Blockchain-as-a-service is the top-trending emerging technology that will help draw future investments in cryptocurrency (BaaS). BaaS, which functions as a third-party cloud hosting service allowing smaller organisations with limited IT resources to more quickly produce digital products utilising blockchain principles, has already been used by companies like Microsoft and Amazon.

According to TrustRadius.com, "Blockchain-as-a-service allows organisations to get apps up and running with the least amount of trouble, similar to software-as-a-service (SaaS). Higher agility and speedier adoption of blockchain are thus possible.

Patent Trends

The many application cases are a source of inspiration and ideas for those "in the know" as asset managers and other financial industry experts endeavour to educate themselves on crypto dynamics and the underlying blockchain technology. Only three blockchain patents were issued in 2016. According to research by Mathys & Squire, by early 2022, the number was getting close to 10,000, and applications are still flowing in. Bank of America and Capital One are both included among the top 10, with IBM reportedly leading the pack with 345 blockchain patent filings.

The use of the category will increase as more banking and financial businesses validate crypto and blockchain use cases, which is quite encouraging for the expansion of crypto VC funds' AUM. Discovering and utilising patent trends can also promote a competitive edge known as the "first mover" advantage, which can be crucial for building crypto businesses and the people who invest in them.

Inflation Impacts

Cryptocurrency was once considered to be an inflation hedge, akin to gold, which is frequently referred to as an "alternative currency." Results in 2022 showed that assumption to be false, as crypto and other high-risk Assets Under Management In Crypto were destroyed.

On the other hand, with inflation at an all-time high and the Consumer Price Index at a 40-year high, investors are increasingly looking for unconventional strategies to provide risk-adjusted returns that beat inflation.

Crypto investment funds can take advantage of the pricing opportunity given the depths to which the crypto market has descended, which are likely to persist amid macroeconomic concerns, to build well-diversified portfolios to add stability and act as a deterrent to inflation when it is primarily brought on by factors like monetary expansion.

In reality, Bitcoin and Ethereum values fell 2.4% and 2%, respectively, the day after the Federal Reserve's July meeting minutes were published, noting inflation as still being "unacceptably high" and signalling continued hikes in interest rates.

Conclusion

First and foremost, the crypto economy is not like a traditional economy. It's not driven by traded commodities or currencies, but instead by blockchain-based tokens and technology. AUM is one of those key metrics in determining the health and viability of a crypto asset. If there are few holders in this asset, usually it means that it can be easily manipulated.

On the other hand, if there are many holders, it means that there is a strong community of interest behind it. Also AUM can give you an indication of how much money has been invested into the cryptocurrency and how that money is being used to follow through with the project's goals.

By Akhilesh Kumar Yadav

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